Governmental ‘Reform’ Is An Oxymoron – OpEd

Four employees of the Export-Import Bank recently were forced out of their jobs following allegations that they had solicited or accepted bribes from beneficiaries of the bank’s subsidies for foreign-based purchasers of U.S. exports or steered loans to politically powerful U.S. exporters.

The director of the Internal Revenue Service testified before Congress that “a dog ate his homework”: computer hard drives at the agency’s Cleveland, Ohio, office apparently had been destroyed, thereby precluding inquiries into selective delays in the agency’s reviews of applications for tax exempt status by organizations associated with the “Tea Party” and other libertarian groups.

Members of the U.S. Secret Service assigned to provide security for the president and his entourage reportedly paid women working in the world’s oldest profession during a trip to Columbia in April 2012.

Behind the veil of the “War on Terror”, an apparently out-of-control National Security Agency has been snooping on the telephone calls and emails of ordinary Americans and gathering information both on them and citizens of countries overseas not plausibly related to imminent national security threats, aided and abetted by a compliant federal intelligence service court.

Stimulated by the Community Reinvestment Act of 1977, U.S. commercial banks and other mortgage lenders extended loans to home buyers who could not afford to repay because that risk was shifted to the taxpayers by guarantees against losses offered by Fannie Mae and Freddie Mac, two quasi-governmental (and now insolvent) agencies.

A new website (www.healtchcare.gov) is launched with disastrous defects in spring 2014, and Oregon later decides to abandon its attempt to create an online portal for uninsured citizens to enroll in its state-based health insurance “exchange.”

The Department of Veterans Affairs is accused of falsifying records about the waiting times for (and the outcomes of) the medical care received by the soldiers, sailors and aviators wounded or disabled in the nation’s incomprehensible interventions in Afghanistan, Iraq and other foreign battlefields.

The list could go on and on.

Within the news cycles triggered by stories of governmental incompetence, budgetary waste, ineffectiveness or corruption, public calls for reform are loud, politicians posture about “doing something,” and a few blameworthy bureaucratic heads sometimes roll. But those justifiable reactions are just sound and fury. All government agencies, whether at the local, state or federal levels of government behave exactly like the IRS, the NSA, or the Department of Health and Human Services.

Why is that so? Since no governmental agency on Planet Earth operates in ways anywhere like a private business entity, any politician who thinks that prior experience in the private sector (“I had to meet a payroll” is a common claim) prepares him or her to improve the public sector’s performance is living in a dream world. And so are the people who vote for him or her.

Modern public choice theories addressing the incentives of bureaucrats and the members of the congressional committees that oversee them teach us that everyone involved in the political process mainly is attuned to the goals of election or reelection to public office. One implication of those theories is that politicians and bureaucrats face irresistible personal payoffs from catering to the demands of special-interest groups and much weaker incentives to pay attention to the amorphous interests of the public at large.

It is impossible to reform the institutions of government. Indeed, the last time the charter of Export-Import Bank was up reauthorization, it was allowed to continue to operate, subject to complying with explicit congressional demands for changes in its loan-guarantee program.

It should be no surprise that none of those demands were fulfilled. The only sure solution to the public sector’s ever more evident failings is to abolish most of its executive branch departments (or downsize them drastically) and to constrain Washington to the powers constitutionally delegated to it in 1787.

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William F. Shughart II

William F. Shughart II is Research Director and Senior Fellow at The Independent Institute, the J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and past President of the Southern Economic Association. A former economist at the Federal Trade Commission, Professor Shughart received his Ph.D. in economics from Texas A & M University, and he has taught at George Mason University, Clemson University, University of Mississippi, and the University of Arizona.